Cost basis and remainder value for raw land.

[mobster27]

Two families each held an undivided share in 118 raw acres. The land was for sale, and an offer had been made for the entire parcel for $250,000, which would have been 125,000 gross for each family. I purchased one of the shares at a reduced price of 117,500 (that family wanted a fast closing). I cooperated with the other family to negotiate the sale of 106 acres: they received 125000.00 for their undivided half (59 acres) and I accepted 84,000.00 as my share in cash and retaining 12 acres for investment which the other family quitclaimed to me. I made two trips requiring airfare, hotel, etc...one trip before buying the property and one trip before selling it--each time an essential visit during which business was performed. I also paid for a survey to carve the 12 acre parcel out of the 118. How do I allocate the travel and survey expenses to the basis as a cost of purchase/sale? How do I determine the value of the 12 acres? Based on the 250,000, the 117,500, or can I place a higher value on it since it has a stream on it.  The county has placed a tax value on it at 40,000.  Thank you!

[smarttees]

you can't use any higher value for your basis than a % of what you paid for that piece of land. You can allot a % of your expenses to it.

[Anonymous]

i would allocate your travel and lodging costs among the 59 acres you bought and so 47/59 of these + 47/59 of the purchase price would be allocated to the cost of sale

12/59 of costs + 12/59 of purchase price would be cost of land you still hold 

even though the 12 acres has a stream, doesn't mean it has a higher value per  acre than what you sold.   116 acres might be worth  $2,000+ per acre but 12 acres might only be worth $1,000 per.  

[mobster27]

How will I document that percentage of basis... ie the 47/59? 

I was attempting to enter the total purchase price of 117,500 plus the closing costs on the Capital Gains worksheet, Part IV lines 4, a-d....

THEN,in part VII, Increases to basis 1d, I had listed a survey, and two trips to meet with attorneys as the increase to basis...had done 100%, but will change that to 47/59 based on the advice I've been given

And THEN, I multiplied the cost per acre at acquisition (should I add the closing costs before finding cost per acre) and multiplying the remaining 12 acres by that price per acre. 

The two answers I received are consistent  with each other....thanks (BTW, I had prepare a capitalizion letter for my previous tax returns in 2016 and 2017--is that necessary for 2018?)

[mobster27]

Thank you.  I think I'm getting it... you see that I had a loss from this sale.  However, the tax appraisal and  probably FMV is higher than the 24,000 mol that the 12/59 calculation gives me.  I guess I'll take a loss this year and then have a gain in the future.... (when and if I sell!)  Thank you again!